By Kim Kyoungwha Feb. 4 (Bloomberg) -- Gold declined for a second day as the dollar traded near a seven-month high against the euro, eroding the appeal of the metal as an alternative investment. Gold for immediate delivery fell as much as 0.3 percent to $1,106.20 an ounce and last traded at $1,109.25 at 1:03 p.m. in Singapore. Bullion for April delivery in New York slipped 0.2 percent to $1,108.10 an ounce. The dollar gained yesterday against 14 of its 16 most-traded counterparts tracked by Bloomberg amid concerns that sovereign debt problems in the European Union will spread. “Fiscal worries in the euro-zone countries weighed on sentiment,” fueling demand for the dollar, Darren Heathcote, an analyst with Investec Bank Ltd., wrote in a report. “Higher U.S. interest rates are also seen as denting the appeal of gold.” The cost of insuring against losses on Portuguese government debt surged to a record yesterday and central bank Governor Vitor Constancio said cutting the budget deficit will require “difficult” measures. Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, decreased 1.58 metric tons to 1,110.34 metric tons as of Feb. 3, according to figures on the company’s Web site. ‘Safe Haven’ Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status, according to Jeffrey Nichols, managing director of American Precious Metals Advisors. Weakness in gold and silver presents “buying opportunities” for those underweight on the metals, he said. “Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold,” New York-based Nichols said in an e-mail to Bloomberg yesterday. “But gold is the ultimate safe haven and the dollar, without the support of sound monetary and fiscal policies, is a depreciating asset.” The dollar also gained after private-sector figures showed U.S. companies cut fewer jobs than economists estimated. Gold advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, helping to send the Dollar Index, a six-currency gauge of the greenback’s strength, down 4.2 percent. The index was little changed today. “All eyes are now on key U.S. non-farm payrolls data and interest rate decisions from the European Central Bank and the Bank of England due later this week,” Heathcote said. Silver was little changed at $16.365 an ounce, platinum fell 0.5 percent to $1,566.50 an ounce and palladium declined 0.5 percent at $435.13 an ounce. To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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